Proposal: Texans to Subsidize Power Generators with Fee on Electric Bills, Annual Costs Could Reach Billions

TCAP’s new report on proposals to mandate expensive subsidies in the Texas power market.

How much would proposed capacity subsidies to generators cost Texans? By at least one estimate, close to $5 billion per year.

And would the extra costs end up in home bills? Absolutely.

The Texas Public Utility Commission currently is considering a proposal that would require retail electric providers to pay these controversial subsidies to generators. The idea is that by further enriching generation companies, they’ll have a financial incentive to keep up with future demand. But the Texas Coalition for Affordable Power and other business and consumer groups have concluded the subsidies would do too little and cost too much.

And home consumers be warned: under a proposal by a coalition of retail electric providers, the expensive subsidies would directly flow into home bills. That is, retail electric providers would pay the subsidies to generators, and then pass that cost directly onto their customers as a separate line item on home bills.

As one retail electric provider group explained in a recent PUC filing, “the pass through of capacity payments by REPs should be allowed in the same manner of (transmission and distribution utility) charges.” That means the benefit of the subsidy will go directly to generators, to help them increase their profits, but the cost goes directly to you — to increase your utility bills.

No one knows yet how much our bills would go up because there’s been no attempt yet to quantify the possible impact on end-use customers. State Sen. Troy Fraser, who is conducting a hearing Monday on the proposed ratepayer-financed subsidies, called for such an analysis earlier this year. Still no word if the Public Utility Commission will follow through.

TCAP has concluded that these subsides would mark a serious break with the principles of electric competition, will needlessly increase prices, and are wrong for Texas. You can read more about capacity subsidies in the new report from TCAP, which you can find here.

TCAP is a coalition of more than 160 cities and other political subdivisions that purchase electricity in the deregulated market for their own governmental use. Because high energy costs can impact municipal budgets and the ability to fund essential services, TCAP, as part of its mission, actively promotes affordable energy policies. High energy prices also place a burden on local businesses and home consumers.

R.A. "Jake" Dyer

Is a policy analyst for TCAP, a coalition of cities and other political subdivisions that purchase electricity in the deregulated market for their own governmental use. Because high energy costs can impact municipal budgets and the ability to fund essential services, TCAP, as part of its mission, actively promotes affordable energy policies. High energy prices also place a burden on local businesses and home consumers.

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